Are Advertisers Losing Money by Pulling out of X (Twitter)?

Advertisers pulling out of X (formerly Twitter) may cost X over $75M in revenue this year! But what about the cost to advertisers? Indeed, they make money from advertising on social media, right?

A benchmark ROI for social media advertising is 3:1 (depending on who you ask). In simple terms, this means that for every $1 spent on advertising, an advertiser will make $3 in profits. That means these advertisers might be walking away from $225M in profits ($75M * 3)!

But what might be the business rationale behind letting go of these X-driven profits?

First, the potential loss of existing customers. It is almost always more profitable to keep holding on to existing customers than to bring on new ones. Suppose there is any risk of existing customers boycotting these advertisers due to their association with X. In that case, it makes sense for these advertisers to stop associating themselves with X, irrespective of the profit loss from advertising on X.

Second, their competitors' decisions. For many large established organizations, it makes more sense for them to play it safe and not take any risks that may be deemed unnecessary. As large organizations spot the trend of other large organizations moving out, it makes sense for them to also move out. Otherwise, they risk taking a reputational hit that may cost them billions.

Conversely, if some of these advertisers notice their peers returning to the platform, they'll quickly return. Let's see what happens next!

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